This invention relates to performing financial transactions with cards and to using such cards to automate recovery of refundable taxes generated from the transactions such as a value-added tax.
In the United States, nearly every state and many municipalities assess sales taxes ranging from one percent to more than ten percent on goods and services purchased within the state, including food and other products. These taxes are imposed at the point-of-sale (xe2x80x9cPOSxe2x80x9d) as a surcharge on the articles bought. Many other countries assess national sales taxes or value-added taxes (xe2x80x9cVATxe2x80x9d) on many goods and services purchased within those countries. In Canada, for example, the Goods and Services Tax runs about 7%, with some provinces adding an additional surcharge for Provincial Taxes. In Europe, these value-added taxes are generally more than ten percent and can be as much as 25% in Denmark and Sweden, although not all goods and services are taxed at the same rate. The United Kingdom, for example, imposes a 17.5% VAT on most articles purchased there. Generally, the advertised price of these goods and services already includes the VAT.
Value-added taxes are imposed for a variety of reasons. They may be used to raise money for a taxing authority, to discourage spending on certain items, or to redistribute the burden of taxation among different elements of the tax base. Value-added taxes are charged on both finished products and intermediate products, i.e., at each step that adds value in the manufacturing process.
In many countries, however, in order to promote exports, some of these VATs are refundable to non-resident visitors subject to a variety of conditions. Generally, if a non-resident purchases an article that is used outside of that country, the visitor can recoup at a later date the money paid as a VAT.
The current methods for obtaining VAT refunds vary among the different countries. Some countries allow the visitor to apply for the refund upon departure, perhaps in a duty-free section of an airport or a duty-free store near the border. However, the visitor must collect the receipts, determine which purchases are refundable, fill out the refund form (assuming it is written in a language the visitor can understand), and wait in line, only to receive the refund in the currency of the country from which the visitor is about to depart.
Canada provides one example of a process for recovering a VAT refund. That process requires a visitor to mail from outside of the country the refund form with the original receipts. The governmental agency can take six or more weeks to process the refund, and the refund is sent to the visitor in Canadian dollars, thus requiring the visitor to incur currency conversion charges.
The United Kingdom provides another example of such a process, requiring two steps to recover refundable VATs. First, each time a visitor makes a purchase for which the VAT is refundable, the visitor must establish eligibility for the refund program by showing the merchant a passport or other form of identification. Some merchants or countries may require a minimum purchase in one store visit or on one item in order to qualify for a refund. Assuming that the visitor has overcome these hurdles, the visitor and the merchant must then fill out a refund document (voucher) provided by the merchant.
Then, while departing from the European Union, the visitor must present the vouchers and the accompanying goods to a Customs agent and obtain a certification form from the agent. (The visitor cannot obtain a certification form after leaving the European Union.) Once outside of the European Union, the visitor must mail back the certified voucher to each retailer from whom a refund is sought. That retailer will then process the refund, subtract a processing fee, and send a sterling check to the visitor, who must then convert the check into a more usable currency.
In some countries, the visitor must spend a minimum amount of money on purchases in order to qualify for a refund. If, for example, this minimum is $500, and the VAT is 25%, then a visitor who spends just under $500 could potentially be losing nearly $125.
Thus, although VAT refunds are available, they may be extremely inconvenient to obtain. From an economic standpoint, the VAT makes goods relatively more expensive for foreign purchasers, acting as a disincentive for potential customers to spend money. On the other hand, to recoup some of the VAT may act as an incentive for foreigners to make purchases in the visited country, but only if recovery of the refund is convenient.
It would therefore be advantageous to reduce the financial and transaction costs and burdens of participating in the refund process, particularly in purchasing the goods, retaining receipts, and applying for a refund.
It is therefore an object of the present invention to present a system and a method for recovering refundable taxes that streamlines the paperwork and the morass of differing rules and restrictions that plagues a visitor attempting to recover a refundable tax such as a VAT.
The method stores on a transaction card a tax recovery application and data related to a purchase transaction. Using the tax recovery application, the method then calculates a refundable tax in response to the purchase transaction data. More specifically, the invention provides the refundable tax, preferably the VAT, to the card user.
Because the transaction card may support several applications besides the tax recovery application, it is not necessary to store the tax recovery application on the card at the time it is obtained. Once stored, though, it is preferable that the tax recovery application determine the home or residence country (xe2x80x9chome countryxe2x80x9d) of the card user.
The types of purchase transaction data that may be stored on the card are the transaction date, the price charged for the transaction, the country in which the tax is being levied (xe2x80x9ctaxing countryxe2x80x9d), and the amount of the refundable tax paid during the transaction.
Preferably, the refundable tax is calculated by determining whether the current transaction is subject to refundable tax, calculating the amount of refundable tax associated with the current transaction, and adding the amount of the refundable tax for the current transaction to the amount of refundable tax stored on the card for prior transactions. It is preferable that refundable tax from more than one taxing country may be refunded using the tax recovery application.
In addition, it is preferable that the method can refund the tax in a number of ways and in a choice of currencies. For example, the tax can be refunded in cash, by adding cash value to the card, by crediting the card user""s credit card account, or by issuing a check to the card user. These refunds may be made in either the currency of the taxing country or in the currency of the home country.
A system in accordance with the present invention includes the transaction card, a transaction terminal into which the card is inserted and that executes purchase transactions and generates purchase transaction data, and the tax recovery application which is stored on the card and which calculates the refundable tax in response to the purchase transaction data. Preferably, the transaction terminal is able to transfer the tax recovery application from an application provider to the card.
As with the method of the present invention, the system includes a means to provide the refundable tax, preferably the VAT, to the card user. In addition, because the transaction card may support several applications, it is not necessary to store the tax recovery application on the card at the time it is obtained.
Also part of the present invention is the transaction card itself. Such a card includes means for storing the tax recovery application, means for transferring purchase transaction data from an electronic purchasing terminal to the card, means for calculating the refundable tax, in response to the purchase transaction data, using the tax recovery application, and means for transferring refundable tax data from the card to an electronic refund terminal.
More specifically, the card includes means for storing the cash value of the refundable tax, which is preferably a VAT. As with the method of the present invention, it is preferable that the cash value of the refundable tax is stored in either the currency of the taxing country or in the currency of the home country. It is preferable that the electronic refund terminal be an ATM-type terminal, a computer connected to the Internet, or a computer connected via a modem to the tax recovery application provider.